Japanese Yen Gains Ground as US Consumer Inflation Contracts

April 11, 2018 Comments Off on Japanese Yen Gains Ground as US Consumer Inflation Contracts

USD/JPY has posted losses on Wednesday, erasing the gains seen which marked the Tuesday session. In the North American session, USD/JPY is trading at 106.72, down 0.45% on the day. On the release front, Japanese Core Machinery Orders gained 2.0%, crushing the estimate of -2.6%. Japanese PPI dropped for a fourth straight month, coming in at 2.1%. This marked the lowest gain since June. In the US, CPI declined 0.1%, shy of the estimate of 0.0%. This marked the first decline since May. Core CPI remained unchanged at 0.2%. Later in the day, the Federal Reserve will release the minutes of the March policy meeting.

As relations between the US and Russia continue to worsen, the markets are growing nervous, which could be a boon for the safe-haven Japanese currency. Syrian forces allegedly used chemical weapons on rebel-held areas last week, and a UN Security Council meeting on Tuesday ended inconclusively after Russia cast a veto on a US proposal to prove the attack. US President Trump has warned of an imminent military strike against Syria, and Russia has countered that it will respond to any US move. If Trump makes good on his promise, investor risk appetite could sink and send the Japanese yen higher.

The tariff spat between the US and China appears far from over, but both sides have lowered the flames which has roiled the markets in recent weeks. Investors are breathing a sigh of relief after Chinese President Xi Jimping sent out a conciliatory message on Tuesday. Xi was speaking at a development conference in China, and promised to lower tariffs on vehicle imports into China. This has been a major sticking point between the US and China, with President Trump complaining that China has a 25% tariff on US vehicle imports, yet the US only charges 2.5% on Chinese vehicles. Xi added that China was looking to solve issues through dialogue rather than confrontation, and the markets are hoping that the US and China can avert a trade war, which could drag down the global economy.